USD/JPY climbs back above mid-113.00s, reversing a major part of overnight slide

A combination of factors assisted USD/JPY to regain positive traction on Thursday.
Hawkish Fed expectations helped the USD to stall the post-US CPI corrective decline.
The risk-on impulse undermined the safe-haven JPY and exerted additional support.

Haresh Menghani FXStreet

The USD/JPY pair climbed back above mid-113.00s during the Asian session and reversed a major part of the previous day's profit-taking slide from multi-year tops.

The US dollar witnessed aggressive selling on Wednesday and erased its weekly gains to 13-month tops amid the post-US CPI slide in the longer-dated US Treasury bond yields. The headline US CPI for September rose 0.4% in September as against 0.3% anticipated and lifted the yearly rate to 5.4%, again beating expectations for a reading of 5.3%. Investors, however, seem aligned with the Fed's transitory inflation narrative, which, in turn, dragged the US bond yields lower.

Nevertheless, the US CPI report reaffirmed market expectations for a potential interest rate hike in 2022. Moreover, the minutes of the latest FOMC monetary policy meeting held in September showed that the US central bank remains on track to begin tapering its bond purchases later this year. Apart from this, a modest rebound in the US bond yields acted as a tailwind for the greenback and assisted the USD/JPY pair to regain some positive traction on Thursday.

On the other hand, a generally positive tone around the equity markets undermined the safe-haven Japanese yen and was seen as another factor that exerted additional support to the USD/JPY pair. The fundamental backdrop seems tilted firmly in favour of bullish trades and the emergence of fresh buying reaffirms the positive outlook. That said, overbought RSI on short-term charts warrants some caution before positioning for any further appreciating move, at least for now.

Market participants now look forward to the US economic docket, featuring the release of the Producer Price Index (PPI) and the usual Weekly Initial Jobless Claims data. This, along with the US bond yields, will influence the USD price dynamics. Traders might further take cues from the broader market risk sentiment for some short-term opportunities around the USD/JPY pair.

Technical levels to watch

USD/JPY

Overview
Today last price	113.5
Today Daily Change	0.25
Today Daily Change %	0.22
Today daily open	113.25

Trends
Daily SMA20	111.18
Daily SMA50	110.42
Daily SMA100	110.26
Daily SMA200	108.81

Levels
Previous Daily High	113.8
Previous Daily Low	113.23
Previous Weekly High	112.25
Previous Weekly Low	110.82
Previous Monthly High	112.08
Previous Monthly Low	109.11
Daily Fibonacci 38.2%	113.45
Daily Fibonacci 61.8%	113.58
Daily Pivot Point S1	113.05
Daily Pivot Point S2	112.85
Daily Pivot Point S3	112.48
Daily Pivot Point R1	113.63
Daily Pivot Point R2	114
Daily Pivot Point R3	114.2

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

Markets move fast. We move first.

Orange Juice Newsletter brings you expert driven insights - not headlines. Every day on your inbox.

Editor's Picks

EUR/USD edges higher to mid-1.1600s; looks to US PCE Price Index for fresh impetus

The EUR/USD pair attracts some dip-buyers during the Asian session on Friday and recovers a part of the previous day's retracement slide from the 1.1680 region, or the highest level since October 17. Spot prices currently trade around mid-1.1600s and remain on track to register gains for the second straight week.

GBP/USD attempts some consolidation near 1.3350

GBP/USD is alternating gains with losses near 1.3350 on Thursday. The Greenback’s attempts to recover aren't really sticking, upbeat data or not, as traders stay confident that the Fed will deliver a 25 bps rate cut at its final meeting of the year.

Gold bull-bear tug-of-war extends ahead of US data

Gold struggles around $4,200 early Friday, eyes a modestly flat close to the week. US Dollar turns south alongside Treasury bond yields amid Fed rate cut buzz. Gold remains confined within a tight range; buyers refuse to give up yet.

XRP slides amid record on-chain activity, mixed technical signals

Ripple (XRP) is trading under pressure at the time of writing on Thursday, after bulls failed to break the short-term resistance at $2.22. The reversal may extend toward Monday’s low of $1.98, especially if risk-off sentiment persists in the broader cryptocurrency market.

Why the Fed may cut rates in December: Understanding the policy shift

The Fed has gone through a noticeable policy swing in recent months - from initiating a rate cut, to signaling a potential pause, and now shifting once again toward another cut in December. This has created understandable confusion among traders and investors trying to interpret the Fed’s reaction function.

XRP edges lower despite record on-chain activity and steady ETF inflows

Ripple is trading under pressure at the time of writing on Thursday, after bulls failed to break the short-term resistance at $2.22. The reversal may extend toward Monday’s low of $1.98, especially if risk-off sentiment persists in the broader cryptocurrency market.